Summary of China Energy Construction Conference Call Company Overview - China Energy Construction (CEC) is a leading enterprise in the energy construction sector in China, involved in traditional energy, renewable energy construction, surveying and design, housing construction, and transportation infrastructure [2][4] - Established in 2014 and listed on the Hong Kong Stock Exchange in 2015, CEC absorbed and merged with Gezhouba Group in 2021, achieving A-share listing [3] Financial Performance - Projected revenue for 2024 is 436.7 billion yuan, a year-on-year increase of 7.6%, with engineering construction accounting for 84% of total revenue [2][4] - Engineering construction revenue for 2024 is expected to be 366.8 billion yuan, growing by 7% year-on-year [2][6] - New contract value for 2024 is anticipated to reach 1.28 trillion yuan, up 6.4% year-on-year, with renewable energy contracts making up 44% [2][6] Market Position and Advantages - CEC holds over 70% of the domestic thermal power engineering construction market and over 30% in hydropower, with more than 50% market share in large hydropower projects [7] - In nuclear power conventional island surveying and design, CEC has a market share of 90% [7] - The company aims to achieve a total installed capacity of 20GW in renewable energy by the end of 2025, having already connected 15.2GW to the grid [9] Business Segments - The engineering construction segment includes various projects in renewable and traditional energy, urban construction, and comprehensive transportation [6] - The design consulting segment reported revenue of 20.8 billion yuan in 2024, with a stable gross margin between 35%-40% [10] - The industrial manufacturing segment includes construction materials and civil explosives, with stable revenue but a decline in aggregate production [10] Future Outlook - Revenue growth is expected to stabilize between 3% and 4% over the next three years, with a steady improvement in gross margins [4][14] - The investment operation business is projected to maintain high growth rates, contributing to overall profitability [14] Recent Developments - In the first half of 2025, new contract value reached 775.4 billion yuan, a 5% increase year-on-year, with notable growth in urban construction and design consulting [17] - The company is undergoing a capital increase plan initiated in 2022, initially set at 15 billion yuan, later adjusted to 9 billion yuan, which has received regulatory approval [12][13] Strategic Projects - The Yarlung Tsangpo project, with a total investment of approximately 1.2 trillion yuan, is expected to significantly impact CEC, contributing to annual infrastructure investments exceeding 100 billion yuan [18] - CEC is positioned to benefit from the ongoing development of the Yarlung Tsangpo project, which is crucial for its long-term growth strategy [19]

Core Viewpoint - The report outlines the mid-term progress of China Energy Construction Co., Ltd.'s "Quality Improvement, Efficiency Enhancement, and Return to Shareholders" initiative for 2024-2025, emphasizing high-quality development and sustainable growth in the face of industry competition [1] Group 1: High-Quality Development - The company is focusing on cultivating new productive forces by leveraging its technological and integrated advantages, achieving record highs in new contract amounts, operating income, and net profit attributable to shareholders in 2024 and Q1 2025 [1] - The company has signed new contracts worth 388.896 billion yuan, with operating income of 100.371 billion yuan and a net profit of 1.612 billion yuan in Q1 2025, reflecting year-on-year growth of 5.75%, 3.05%, and 8.83% respectively [4] Group 2: Innovation and Transformation - The company is accelerating its innovation-driven transformation, establishing itself as a source of original technology, with projects like the world's first megawatt-level demonstration of umbrella-ladder wind power generation technology [2] - The installed capacity of new energy projects reached 15.5085 million kilowatts by the end of Q1 2025, with cumulative development indicators of 72.4947 million kilowatts [2] Group 3: Digital and Smart Transformation - The company is focusing on digitalization across management and industry, with the launch of a smart zero-carbon big data industrial park in Gansu and the establishment of 155 business scenarios for AI development [3] Group 4: Investor Returns and Governance - The company has implemented cash dividends for 10 consecutive years since its listing, with a total cash dividend of 1.613 billion yuan in 2024, an increase of 48.80% from 2023, representing 20% of net profit attributable to shareholders [4] - The company has enhanced its governance structure by appointing a female independent director and revising several governance rules to improve decision-making processes [8] Group 5: Market Value Management - The company has established a market value management system, with a focus on balancing performance growth and market value, and has seen its controlling shareholder increase holdings by 350 million yuan [9]

Investment Rating - The report maintains a "Buy" rating for China Energy Construction (3996.HK) [1] Core Views - The company has demonstrated stable operations with rapid growth in its new energy business, achieving a revenue of 436.71 billion CNY and a net profit of 8.4 billion CNY in 2024, reflecting a year-on-year increase of 7.6% and 5.1% respectively [4][5] - The new energy and integrated smart energy sectors have shown significant revenue growth, contributing to the overall revenue increase and optimization of the business structure [5] - The company has improved its cash flow management, with a net operating cash inflow of 11.03 billion CNY in 2024, an increase of 15.4 billion CNY compared to the previous year [8] Financial Performance Summary - In 2024, the company achieved operating revenue of 436.71 billion CNY, a year-on-year increase of 7.6%, and a net profit of 8.4 billion CNY, up 5.1% [4] - For Q1 2025, the company reported operating revenue of 100.37 billion CNY, a 3.0% increase year-on-year, and a net profit of 1.61 billion CNY, which is an 8.8% increase [4] - The gross margin for 2024 was 12.4%, slightly down from the previous year, while the net margin was 2.7% [6] Business Segments and Regional Performance - The new energy and integrated smart energy sectors generated revenue of 139.76 billion CNY in 2024, a 13.9% increase year-on-year [5] - The company’s engineering construction, investment operation, industrial manufacturing, and surveying design and consulting segments reported revenues of 366.82 billion CNY, 36.13 billion CNY, 32.22 billion CNY, and 20.83 billion CNY respectively in 2024 [5] - Domestic and overseas revenues for 2024 were 380.57 billion CNY and 56.14 billion CNY, reflecting increases of 8.8% and 0.03% respectively [5] Contract and Order Growth - The company signed new contracts worth 1,408.88 billion CNY in 2024, a 9.8% increase year-on-year, with significant contributions from engineering construction and surveying design [7] - In Q1 2025, new contracts amounted to 388.9 billion CNY, a 5.8% increase year-on-year, with notable growth in the new energy sector [7] Profitability and Valuation - The report projects a decrease in net profit forecasts for 2025 and 2026 to 9.1 billion CNY and 9.6 billion CNY respectively, reflecting adjustments due to market conditions [8] - The estimated P/E ratio for 2025 is 4.2, indicating a favorable valuation compared to historical performance [9]

Core Viewpoint - The company reported steady growth in Q1 2025, with revenue reaching 100.37 billion yuan, a year-on-year increase of 3.05%, and a net profit attributable to shareholders of 1.612 billion yuan, up 8.83% year-on-year, indicating strong operational performance despite market challenges [1] Group 1: Financial Performance - In Q1 2025, the company achieved a gross profit margin of 11.18%, an increase of 0.47 percentage points year-on-year [2] - The net profit margin stood at 2.60%, reflecting a year-on-year increase of 0.19 percentage points [2] - The company reported a net cash flow from operating activities of -14.51 billion yuan, which was a decrease in outflow of 1.68 billion yuan compared to the same period last year [2] Group 2: Contract and Business Growth - The company secured new contracts worth 388.9 billion yuan in Q1 2025, representing a year-on-year growth of 5.8% [1] - The core engineering construction segment saw new contracts amounting to 364.05 billion yuan, a year-on-year increase of 15.5% [1] - New energy business contracts grew significantly, with traditional energy, new energy, integrated smart energy, urban construction, and comprehensive transportation contracts increasing by 6.1%, 20%, 57.8%, and 96.7% respectively [1] Group 3: Regional Performance - Domestic new contract value reached 287.46 billion yuan, a year-on-year increase of 4.2%, while overseas new contracts totaled 101.44 billion yuan, up 10.5% year-on-year [2] - The overseas new energy and integrated smart energy projects saw a remarkable year-on-year growth of 53.7% [2] Group 4: Future Outlook - The company maintains its profit forecast for 2025-2027, estimating net profits attributable to shareholders at 8.79 billion, 9.41 billion, and 10.17 billion yuan respectively [1] - The company continues to enhance its emerging business segments, with significant advancements in technology innovation and new business layouts in hydrogen energy and AI [1]

Core Viewpoint - The company is expanding its presence in the renewable energy sector through significant contracts in Azerbaijan and domestic projects, driven by strong demand for energy engineering services [3]. Group 1: International Projects - On March 11, the company signed EPC contracts for two large photovoltaic projects in Azerbaijan, marking its first major undertaking in the country [2]. - The Bilasuvar project is noted as the largest photovoltaic project currently under construction in Azerbaijan, with a total capacity of 445MW [2]. - Azerbaijan aims to increase its renewable energy generation share from 20.3% in 2023 to 30% by 2030, indicating a growing market for renewable energy projects [3]. Group 2: Domestic Market Developments - The company is experiencing a surge in domestic orders due to a new electricity pricing policy that has sparked a rush for installations [3]. - Recent domestic contracts include a 75MW wind power project and multiple engineering projects for the State Grid, showcasing the company's ability to secure significant contracts [3]. Group 3: Strategic Initiatives - The company is actively participating in the construction of a national integrated computing power network, leveraging its technological advantages in green energy [4]. - Investments in data center projects are underway in several key locations, with the Gansu Qingyang data center set to begin operations in September 2024 [4]. - The company has signed a conditional share subscription agreement with Chengdi Xiangjiang to establish a "national team" for computing power centers [4].

Investment Rating - The report maintains a "Buy" rating for China Energy Construction (3996.HK) [6] Core Views - The company is experiencing robust domestic and international demand for energy projects, highlighted by recent contracts for large photovoltaic projects in Azerbaijan, marking its first major EPC project in that market [2][3] - The company is actively constructing a nationwide integrated computing power network, leveraging its technological advantages in green energy and integrated construction [3] - The company's financial performance is strong, with a projected net profit growth of 17.3% year-on-year for the first three quarters of 2024, leading to an upward revision of the 2024 net profit forecast to 8.6 billion CNY [4] Summary by Sections Recent Developments - On March 11, the company signed EPC contracts for two large photovoltaic projects in Azerbaijan, with a total capacity of 760MW, indicating a significant expansion into the renewable energy sector [2] - The domestic market is also seeing a surge in orders due to new electricity pricing policies, with the company winning multiple contracts for wind and power grid projects [2] Business Strategy - The company is focusing on building a national integrated computing power network, with investments in data center projects across several key locations [3] - The Gansu Qingyang big data industrial park project is highlighted as a key initiative, with the first phase expected to be operational by September 2024 [3] Financial Performance - The company’s revenue is projected to grow from 366.4 billion CNY in 2022 to 481.7 billion CNY by 2026, with a compound annual growth rate of approximately 6.23% [5] - The net profit is expected to increase from 7.8 billion CNY in 2022 to 9.8 billion CNY in 2026, reflecting a steady growth trajectory [5] - The report notes a low valuation level for the company, suggesting significant growth potential in its energy and computing power businesses [4]